In Part Four I wrote about the dread that some of us experience when we contemplate the fantasy Number that we think that we have to save in order to retire. Once I abandoned my original demented plan to work as long as it took to achieve my Number, I asked my financial planner to run one of those fancy computer programs which tells you where to take your money from to fund your lifestyle. In my case, the choices were: (a) personal savings, including my TFSA; (b) my professional corporation; and (c) my RRSP.
When I looked at the report generated by my financial planner, it appeared to call for me to withdraw money that I had to pay tax on from my RRSP and my professional corporation in my early years of retirement, instead of taking money from my personal savings. In addition, this disqualified me from receiving Old Age Security.
When I questioned the results, the financial planner explained that this plan would result in the lowest tax being paid by the combination of me and my estate.
“Let me get this straight,” I asked, “You want me to pay more tax while I am alive so my kids can pay less tax when I die, and to walk away from free money from the government in the process?” And then I followed that up with the following respectful question: “ Are you out of your flipping mind?” (I did not actually use the word “flipping.”)
I then patiently explained to my financial advisor my financial philosophy, which I summed up as follows:
- I wanted as much money as possible to have fun with while I can still have fun.
- I did not care how much money would be left after my wife and I are gone.
- If I could predict exactly when my wife and I would die, I would depart this world with my bank account at zero and my credit cards maxed out.
- My kids can have what is left, if any.
Now I am fortunate enough that my children are able to take care of themselves. I am sure that I would have different priorities if they could not. And you may well be a nicer, more generous, person than me. Gifts to your children or strangers or charities may be important to you.
The point is that each of us has different financial priorities and that they will impact our choices in retirement. It is important to figure this stuff out, get on the same page with your significant other if you have one, and then make choices that work for you.